THE CHALLENGES OF SMALL AND MEDIUM SCALE ENTERPRISES (SMES) IN NIGERIA
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CHAPTER ONE
INTRODUCTION
1.1 Background to the study
The role of small and medium scale enterprises in developing countries, especially Nigeria in particular is progressively becoming significant. Significant in the sense that all available resources in any given situation in the economic well- being of a nation must be developed for industrialization and ultimately consumption through the small and medium scale businesses. Hence, the impact and potential contribution of small and medium scale businesses on a broad and diverse base as well as their accelerated effect in achieving macroeconomic objectives pertaining full employment, income distribution and the development of local technology, make the existence most inevitable. Therefore, the importance of small and medium scale enterprises in particular to the general economic development of any nation especially a developing one like Nigeria cannot be over emphasized.
Small and medium scale enterprises (SMES) have been recognized as indispensable components of natural development in both developed and developing economies. This subsector of the economy is globally acknowledged to contribute substantially in enhancing employment creation or generation, poverty alleviation, equitable distribution of resources, income redistribution, technical and technological innovation, entrepreneurial skills development, more uniform industrial and economic region- moreover, they have been tout strategic in ensuring food security and encouraging rapid industrialization and reversal of rural-urban migration.
Although small and medium scale enterprises (SMES) are seen as veritable engines of economic development, the growth and development of small and medium scale enterprises in Nigeria have been slow and, in some cases, even stunted, due to a number of problems and challenges confronting this all-important sub-sector of the economy. Some of the problems highlighted in the body of literature as being responsible for the slow growth and development of the small and medium scale enterprises include: deplorable infrastructural facilities funding and financing challenges; inadequate managerial and entrepreneurial skills; corruption and lack of transparency arising from government regulation and regulators etc.
It had been argued that the most disturbing among these challenging is funding, but concedes that most new small business enterprises are not attractive prospects for banks as they want to minimize their risk profile. Small and medium scale enterprises (SMEs) in Africa have therefore been found to rely largely on own savings, not only to grow, but also to innovate, whereas firms often need real services support and formal finance assistance, failing which under investment in long term capabilities (Training and R & D) may result on the other hand, small and medium scale enterprises (SMEs) in Nigeria had been blamed for poor performance on management practices, poor access to finds, low equity participation from stakeholders, poor infrastructural facilities, shortage of skilled manpower, multiplicity of regulating agencies and the over- bearing operating environment, societal and attitudinal problems, little access to markets and lack of access to information.
In spite of these problems and challenges, Government and other financial institutions had held out programmes for the prospects of small and medium scale enterprises (SMEs) in Nigeria. The current economic reform process ongoing in Nigeria aimed at reducing poverty, unemployment and strengthening of basic institutions and sub-sector of the economy target at improving and enhancing the capacity of small and medium scale enterprises (SMEs) as instrument of economic growth and development.
A lot has been said and written about small and medium scale enterprises (SMEs) the world over. It has also formed the subject of discussion in so many seminars and workshops both locally and internationally. In the same token, government at various level (Local, State and federal levels) have in one way or the other focused on the small and medium scale enterprises (SMEs). While some governments had formulated policies aimed at facilitating, empowering the growth, development and performance of the small and medium scale enterprises (SMEs) to grow through soft loans and other fiscal incentives.
International agencies and organizations (World Bank), United Nations Industrial Development Organization (UNIDO), International Finance Corporation (IFC), United Kingdom, Department for International Development (DFID), European Investment Bank (EIB) etc are not only keenly interested in making small and medium scale enterprises (SMEs) robust and vibrant in them. Locally, the several non-governmental organizations such as fate foundation, Support and Training Entrepreneurship Programme (STEP), the Nigeria Investment Promotion Commission (NIPC), the Association of Nigeria Development Finance Institution (ANDFI), as well as Individual Development Finance Institution (IDFI) have been promoting the growth of small and medium scale enterprises (SMEs) in Nigeria through advocacy and capacity building imitative and have continued to canvass for better support structures for operator in the small and medium scale enterprises (SMEs) sub-sector.
However, this project work examines the respective strengths and drawbacks associated with the historical trends and efforts at developing small and medium scale enterprises (SMEs) in Nigeria. It identifies and analyses the opportunities provided for the promotion of Small and Medium Scale Enterprises (SMEs) in Nigeria. Here, this study titled “small and medium scale enterprises (SMEs) in Nigeria, the problems and prospects” cannot come at a better time.
1.2 Statement of the Problem
The Nigerian National economy is characterized by mirage of problems which has constituted a sleepless night to developmental oriented governance. The most disturbing problems are that government has not played a favorable role towards the promotion and development of small and medium scale enterprises, in the sense that government create unfavorable fiscal policy inconsistencies and lack of the infrastructural facilities by the government, which have stunted and stagnated the growth of small and medium scale enterprises in Nigeria. small and medium scale enterprises are seen as a veritable engines of economic development, but the growth and development of small and medium scale enterprises in Nigeria have been slow and in some cases even stunted, due to a number of problems and challenges confronting this all-important sub-sector of the economy. Some of these problems includes: financial problems, poor management expertise, poor accounting system, lack of materials etc, which the researcher tends to find solution to them. More so, in Nigeria, most small and medium scale enterprises are folding up or lack competitiveness because they lack the much-required financial capacity to prosecute their manufacturing concern.
1.3 OBJECTIVES OF THE STUDY
The general objectives of this study is to identify the ways of financing small and medium scale enterprises (SMEs) and the specific objective are to:
- to identify the economic potential of small and medium scale enterprises in Nigeria.
- to assess the prospects of SMEs growth and development in Nigeria.
- to determine the perception of SMEs owners and their views toward the growth and development of SMEs in Nigeria
1.4 RESEARCH QUESTIONS
These are well structured questions designed to guide the researcher in data collection and whose answers provide solutions to the problem(s) under investigation. At the back of the mind of the investigator is the question: would answers to those questions provide solutions to the perceived problem being studied following our topic the researcher could raise the following research questions.
How do we assess the role played by the government towards promotion and development of small and medium scale enterprises in Nigeria?
- To what extent are the prospects of SMEs growth and development in Nigeria?
- To what extent does the perception of SMEs owners influence their views toward the growth and development of SMEs in Nigeria?
1.5 RESEARCH HYPOTHESIS
- There is no significant effect of challenge of SMEs on the growth and development of SMEs in Nigeria
- There is no significant influence of the prospects of SMEs in the growth and development of SMEs in Nigeria.
- There is no significant effect in the perception of SME owner towards the growth and development in Nigeria.
1.6 SIGNIFICANCE OF THE STUDY
This study will be a valuable help to various stakeholders for implementations with the concerned efforts of all and sundry including: governments. Policy makers: It will guide them in making policies and regulations that will create enabling environment for small and medium scale enterprises levels, SME promoters etc.
SMEs: This study will enable them to identify the problems confronting the development of small and medium scale enterprises.
Investors/Entrepreneurs: It will enable them to know what they expected of government in the promotion of small and medium scale enterprises. It will also enable them to know the cost involvement in establishing the small and medium scale enterprises.
Companies: They will also benefit from this study, since they are interested in the overall success, operational and financial efficiency evaluation of the firm.
Student/Researchers: This study will also be a benefit to them, since they are curious in studying or knowing more about the topic and in their research work.
1.7 SCOPE OF THE STUDY
Because the researcher could not be able to cover the whole of Lagos, Nigerian small and medium scale enterprises (SMEs). The researcher narrowed it down to the number of registered small and medium scale enterprises in selected LGA where the sample size was determined.
This study covered the problems and prospects of some selected small and medium scale enterprises (SMEs) in Lagos, Nigeria.
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